Long-term Unemployment: The Vicious Cycle Gets Worse

As we know, unemployment duration is at historical highs with the average length at 36.6 weeks, however thanks to recent data we can see how significant an impact this situation has on a person’s earnings. According to the BLS, a worker returning from long-term unemployment (longer than 27 weeks), sees on average a 5% decline in wages. The study analyzed men from 1979 to 2009, but excluded women due to the huge shift in their labor market over that period of time.

The BLS found that the first time a man experiences longterm unemployment, it lasts for 55 weeks on average. What’s interesting is that four years later, the average employee still hasn’t made it back to their peak wages. The process that leads to longterm unemployment, and the period of joblessness itself, seems to put a lasting dent in their earning power.

What’s more, as you can see in the chart below, is that it takes nearly two full years to get back to the earnings levels experienced at the time of job loss. Given the struggling labor market showing inconsistent results and the average duration of unemployment longer than what the BLS deems “long-term”, the future for many may be bleaker than their recent past.